Options vs. Futures…+ Trading Levels for 11.03.2022
Posted By:- Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
Options on Futures OR Outright Futures?
By John Thorpe, Senior Broker
Trading futures Options may be more suitable for your account’s well being when you are right about the direction of the asset, but incorrect about the timing of the move. Through options, you are literally buying time and value if they are in the money at expiration.
An option on a futures contract is the right, but not the obligation, to buy or sell the underlying futures contract at a predetermined price on or before a given date in the future.
- Options can be used like insurance policies to limit losses on a futures contract.
- They can also be used for speculative purposes, whether you are selling options to receive premium income or using options to establish a position in a particular commodity, index or interest rate.
- As hedging instruments, options can produce offsetting gains in the face of adverse price changes in the cash market.
- Options permit you to efficiently deploy capital, in the form of option premium. In this case, you can participate in the price movements of the underlying asset, without having to buy the asset outright.
Below is a roughly 1 hour course produced by the CME titled:
As always, plan your trade and trade your plan. Please contact your broker or Cannon Trading with any questions.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.
Futures Trading Levels
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.